So I was sitting at a presentation in Rio de Janeiro (tough
life, I know) recently. The topic was regulation in offshore funds
and I had finished my remarks on how awesome the Cayman Islands are
and why everyone should set up funds there. I'll be honest and
say that I was now looking forward to that evening's
caipirinhas by the pool.
I had talked about FATCA and AIFMD as part of my section of the
presentation. However the next session had many more acronyms,
including OECD CRS. This acronym stuck out as a sore thumb mainly
as it is the next reporting requirement to be implemented in the
Cayman Islands and the British Virgin Islands.
OECD CRS stands for Organisation for Economic Co-Operation and
Development. CRS stands for Common Reporting Standards. I'll
bite my tongue (slightly) here and say that it would be fantastic
if all the other countries in the world could get together and come
up with one true reporting standard so we don't all have to
suffer the various differing reporting regulations which we're
all now subjected to. We're happy to help you with your tax
reporting but come on, lets make it easier... but this is what the
OECD are actually attempting to do. Let's all high five the
Cayman and the BVI have recently announced that they will be
implementing the OECD CRS and that implementation will be completed
by September 2017 – both jurisdictions are in fact two of the
frontrunners in the whole process. This is an impressive commitment
and yes, we are still high-fiving ourselves but we also realise
that there's some work to be done before then. So what is it?
What do we now have to add to the list of things with which a
Cayman or BVI fund has to comply?
Well, CRS is almost the holy grail of automatic information
exchange for tax purposes. More than 90 countries have signed up to
commit to its implementation. Think of this as FATCA's bigger,
hopefully prettier, brother/sister (whichever is your preference!).
You'll be surprised to learn that, so far, the US is hanging
onto FATCA so you will have to make sure that you also continue
complying with that lovely bit of legislation.
The Multilateral Convention on Mutual Administrative Assistance
in Tax Matters (let's just call that the Convention from hereon
in) has Cayman, the BVI and many other countries contracted to it
in various manners. The Convention allows these countries to enter
into agreements for automatic exchange of information with respect
to tax matters. This has resulted in the Multilateral Competent
Authority Agreement (let's call this the MCAA as my fingers are
starting to hurt, but I do appreciate this is yet another
acronym...). This in turn provides the basis on which countries can
agree a common reporting standard. So you have a legal basis on
which each country can agree with another country what the common
reporting standards could be. But you can see the problem –
Country X could have 90 agreements with different countries and
this could result in many different reporting standards (US
–v- UK FATCA anyone??).
So the OECD has produced its Common Reporting Standards which it
hopes will be adopted by most countries. Sounds like they heard our
earlier plea for simplicity!!
Both Cayman and the BVI will introduce domestic legislation to
make it effective and shortly thereafter, we expect to have written
guidance as to the standards themselves. As a sneak preview, we do
expect some similarity with the existing FATCA regimes with some
key differences (you didn't think it was going to be completely
straight-forward, did you?), for example CRS will be based on tax
residency not citizenship.
Funds will be expected to provide their first reporting by 31
Of course, we'll keep you up to date with developments on
this front. Right after the next round of caipirinhas.....
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